Bank economists foresee 'half-hearted' recovery

By Dick Uliano, CNN


WASHINGTON (CNN) -- Bank economists are forecasting moderate economic growth for the remainder of this year and all of next year, bringing the unemployment rate down "painfully slowly" to 8.5% by the end of 2011.

An American Bankers Association panel said Wednesday it's very likely the economy will avoid a "double-dip" recession but the ABA's Economic Advisory Committee Chairman -- Stuart Hoffman, chief economist of PNC Financial Services, Inc. -- said economic recovery in the United States will be "half-speed or half-hearted" over the next several years.

Is buying bonds now a good investment?
  • Not for me, I look for higher returns.
  • Ive always diversified with bonds.
  • Im buying bonds now because of stock volatility.
  • Yes but only government-issued bonds.

Hoffman told a news conference, he expects the U.S. economy will remain in a "rehab period" for the next several years, "as it works its way to fuller health."

The economists, who briefed the Federal Reserve Board of Governors on their findings on Tuesday, believe the economy, as measured by GDP, will grow about 3% this year and next year creating about 2.2 million jobs this year and another 2.5 million jobs in 2011.

Keitaro Matsuda, chief economist for Union Bank N.A. told CNN that, "the pattern or trend is encouraging but the pace is definitely discouraging." Matsuda added that the slow pace of job creation, "might be somewhat frustrating to many people."

The panel predicted that the nation's jobless rate, at 9.7% in May, would fall by just three tenths of a percent by year's end.

While forecasting modest but steady economic growth, the ABA said it expected inflation to remain in check this year and even next year when the group unanimously agrees the Federal Reserve will begin raising interest rates by as much as 1.5% by the end of 2011.

While banks have tightened the reins on lending since the economic crisis began, the ABA panel expects lending will be increased to both businesses and consumers this year and more rapidly next year.

The group's economic forecast calls for only a limited impact on the U.S. economy from the European debt crisis.

The bank economists listed a number of factors preventing quick and robust economic recovery. "Commercial real estate has not turned around and is a drag," Hoffman said. He also blamed financial weaknesses in state and local governments and modest consumer spending.

"The kind of economic growth we're expecting to see is not the typical kind of growth we usually see after a deep recession," according to Matsuda.

The bank economists also said that 2011 tax hikes on upper-income Americans would play a role in keeping economic and jobs growth modest. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,563.30 -317.06 -1.88%
Nasdaq 4,369.77 0.00 0.00%
S&P 500 1,930.67 -39.40 -2.00%
Treasuries 2.56 0.00 0.08%
Data as of 5:14am ET
Company Price Change % Change
Bank of America Corp... 15.25 -0.33 -2.12%
Micron Technology In... 30.55 -1.98 -6.09%
Apple Inc 95.60 -2.55 -2.60%
Facebook Inc 72.65 -2.03 -2.71%
Pfizer Inc 28.70 -0.56 -1.91%
Data as of Jul 31

Sections

Malaysia Airlines was in major trouble even before the twin disasters of Flight 370 and Flight 17 claimed the lives of 537 people. More

With RadioShack burning through cash, investors and credit rating agencies believe its days are numbered. More

LinkedIn shares surged in after-hours trading Thursday following strong second-quarter earnings, following the likes of Facebook and Twitter. More

Terrell White has had a profit-sharing plan for his employees since 1981, believing that if the staff isn't happy, guests won't be either. More

The Mason family, which has been struggling to pay the $100,000 student loan bill they were left with when their daughter passed away five years ago, is now seeing an outpouring of support. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.